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Billionaires discuss income inequality

TANYA NOLAN: Income inequality has become the topic of conversation at the world's biggest annual gathering of billionaires and business leaders.

And it's not just the Occupy Wall Street protesters gathered outside the World Economic Forum in Davos, Switzerland who are concerned about it.

Many of the business leaders gathered inside are acknowledging that the world's workers have borne the brunt of the financial crisis.

And they argue a sustainable economic recovery depends on those workers getting a bigger share of the spoils.

Business reporter Michael Janda has more.

MICHAEL JANDA: Many of the world's richest people are meeting in the mountain resort of Davos in Switzerland.

But amid the Lear jets and limos there has been some focus on those who struggle even to put food on their plates every day.

The chief executive of corporate giant Unilever, Paul Polman.

PAUL POLMAN: There's still a billion people going to bed hungry every night in this world and the number is going up since we've had the crisis in 2008. In fact it went up by 40 to 60 million. There's still a child dying of hunger every six seconds. It is impossible to live in an equilibrium or a stable world if we don't address the issues of food security which have been underlying many of the economic discontents or riots in many of the countries.

MICHAEL JANDA: And World Bank president Robert Zoellick echoed that warning, telling Bloomberg that too much European austerity may push angry societies and the global financial system over the edge.

ROBERT ZOELLICK: If we are sitting here six months from now and the Italian public says enough is enough then what happens to Europe.

REPORTER: What does happen then?

ROBERT ZOELLICK: It is very bad.

MICHAEL JANDA: But it's not just the threat of strikes and riots that has the wealthy worried.

Rich people tend to save more of their income and most companies depend on the demand of average wage earners to sell their goods.

A lack of jobs and low wages equals low demand for those goods and that equals falling profits.

Economist Dr Richard Denniss, who heads the Australia Institute think tank, says that's one reason why western countries are keen to see workers in places like China and India earn more.

RICHARD DENNISS: We need the Chinese workers to be rich enough to be able to buy some of the things they produce and when Chinese workers are also China's main consumers, it will be a more stable situation both for the Chinese economy and the world economy.

MICHAEL JANDA: Because we won't have a flood of exports with no one to buy them?

RICHARD DENNISS: That's right.

MICHAEL JANDA: But it's not just global income inequalities that pose an economic threat.

Nobel Prize winning economist Professor Joseph Stiglitz from Columbia University told Bloomberg that the average American hasn't seen a real pay increase in over three-decades.

JOSEPH STIGLITZ: The real problem is the gains have gone not to workers, they've gone to capital. They go somewhere else, to the executors, but not to the workers and that's really the point.

MICHAEL JANDA: Many economists believe that was a major cause of the run-up in household debt that led to the global financial crisis as households borrowed money in an effort to just maintain their standard of living and Professor Stiglitz says business owners are trying to keep even more of the profits for themselves with moves to automate and mechanise at the expense of jobs.

JOSEPH STIGLITZ: And many companies across America are replacing workers with for instance automatic checkout machines in drug stores and grocery stores so at the very time when we have high unemployment, we are firing workers. Now what we need to do is to focus technology on saving our resources which are very scarce rather than saving labour.

MICHAEL JANDA: Richard Denniss says another problem is tax systems that favour those who make a living by owning things, rather than those who earn a wage or salary.

RICHARD DENNISS: With the 50 per cent tax discount for income from capital gains, many people pay a lower rate of tax on their multimillion dollar incomes than many ordinary Australians do and of course there are people in Australia who pay zero tax on multimillion dollar incomes as long as they structure it through their superannuation.

MICHAEL JANDA: He says, for all the talk at Davos about the dangers of income inequality, it's up to the wealthy themselves to do something about it.

RICHARD DENNISS: If billionaires are willing to put their money where their mouth is, they'll support significant changes to the tax system in Australia, in America and in all rich countries.

MICHAEL JANDA: Some billionaires are on board with investor Warren Buffett famously criticising the US tax system for charging his secretary a higher rate of tax than he pays.

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